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RBI expected to hold policy rate at 5.25% as inflation stays in band

Commerzbank says FX reserves have climbed back above USD 700 billion, giving the RBI more capacity to smooth INR volatility even as crude oil and gold pose key risks.

Reported · Written up by our desk · EM Currencies

Commerzbank analysts Dr. Henry Hao and Moses Lim said India’s Reserve Bank is likely to stay on hold, citing an economy supported by domestic demand and encouraging export growth. They project growth of 6.7% for fiscal 2026-2027, down from 8% in the prior fiscal year.

The bank expects inflation to remain around 5%, which sits within the RBI’s 2% to 6% target range. With inflation steady, Commerzbank said the RBI should keep its policy rate at 5.25% in a wait-and-see stance.

On external stability, Commerzbank pointed to FX reserves above USD 700 billion as a buffer that can help the RBI smooth INR volatility. The analysts added that risks remain tied to potential increases in global crude oil and gold prices.

Commerzbank also noted the RBI’s recent effort to attract foreign capital by announcing it will close the Foreign Currency Non-Resident (Bank) deposit scheme one month early, on 31 August.

Latest closeGold $4,432.00 ▲1.6%|WTI crude $82.40 ▲1.4%

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